RDR will ‘exacerbate ’ pension saving lack

Changes being wrought on the advisory sector as a result of the Financial Services Authority’s Retail Distribution Review will prompt a further decline in the already low rate of pension saving in the UK, according to global management consultancy AT Kearney.

According to a new study released by the firm and conducted by YouGov, a quarter of people on a salary of up to £40,000 per annum are unsure whether they currently have any pension arrangements in place, while 29 per cent of those earning over £100,000 also do not know whether they are still contributing to their pension or even if they have one.

The data showed that situation is worse for women, with 49 per cent unsure if they have any pension savings at all.

According to the study, changes coming in under the RDR will further exacerbate this issue, with IFAs moving further upmarket to find affluent clients with large capital bases.

AT Kearney warned that, as a result, there will be “huge over-servicing” of the top end of the market, with those people on lower wages unable to understand how best to control their finances or when to sort out their pension.

The survey had a sample size of 2,073 adults.

Neil Dennington, a principal at A.T. Kearney, claimed that people, of all ages, are really only thinking about the ‘here and now’ in terms of their finances and seem “unable or unwilling to plan financially for the future”.

He claimed that the government’s and the FSA’s focus appears to be “much more on policing cases of mis-selling”, than addressing the much bigger issue that the great majority of the population are “uneducated” about their finances.

Mr Dennington claimed that pension participation rates across the working age population is lower than official government numbers suggest.

He said: “Recent DWP analysis showed that 38 per cent of working-age people are saving into a private pension, we believe the figure to be lower at 36 per cent.

“This means the decline in pension saving is even more pronounced than thought which will have a profound impact over the long term for government and citizens alike.

“Financial education has to start early on and the industry has introduced a new 16+ qualification - the National Securities and Investment Certificate.”

The consultancy hopes that state schools will offer this course in the future and will provide students at a young age with an understanding to financial services and products.

Mr Dennington said: “Through a better understanding of finance, people will hopefully be able to make more informed choices about financial matters, especially about the need to save for the future and put money into a pension.”